Non Reoccuring Items - Los 28.c

Question 1

What is an unusual or infrequent item?

Answer 1

Unusual/infrequent in occurence and material (significant enough to affect opinions of other)
- they are included in income from continuing operations and reported before tax

Question 2

Give me an example of some of these costs

Answer 2

• Gains/losses from sale of assets or part of business
• Impairments/writeoffs/writedowns
• Restructuring costs

Question 3

What is a discontinued operation

Answer 3

One that management has decided to get rid of, but has not done so yet, or has disposed of in the current year after the operation has generated.
- It needs to be physically and operationally distinct from the rest of the firm (assets, operations, investing and financing)

Question 4

What is the measurement date and phaseout period?

Answer 4

Measurement date - time when company develops formal plan for disposing of an operation
Phaseout period- time between measurement date and actual disposal

Question 5

How is it reported

Answer 5

Presented seperately from the income statement, net of tax, after income from continuing operations.

Question 6

What do changes in accounting policy require?

Answer 6

Unless it is impractical to do so - a achange in accounting policy requires retrospective application.
But can also do modified restrospective application in which there is not restatement of prior periods, but only of the cumuklative beginning effects of the change

Question 7

What accounting treatment does a change in accounting estimate have

Answer 7

A change in accounting estimate is the result of a change in managements judgement and thus are applied prospectively. - This also does not effect cash flow.